The Most Strategic Time to Pay Your Credit Card Balance

Photo: Ivan Kruk (Shutterstock)

You know you need to pay your credit card bill on time, and that you should always pay enough to avoid keeping a balance. But if you struggle with managing your money, you might be tempted to pay off your credit card immediately after every purchase. This payment strategy would essentially be treating your credit card like a debit card: Sure, you’d avoid racking up any debt—but you’d also be hurting your credit health along the way. Here’s what to know about the most strategic time to pay off your credit card.

The basics of credit card payments

In order to know the best way to pay off your credit card, you should understand the basics of your credit card statement. At the end of your billing cycle (typically every 30 days), you receive a statement with your current balance. That balance reflects all the purchases made with your card during the billing cycle, plus any unpaid balance or interest carried over from previous cycles.

Your statement will tell you the minimum required payment you need to make before a certain due date (typically a couple of weeks after receiving your statement). The minimum payment is what is necessary to avoid a late fee, but you should always pay more so you don’t accrue interest and accumulate debt.

You should always aim pay off your statement balance in full and on time. But here’s why you shouldn’t get overeager with paying off your balance too frequently.

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What happens when you pay off your credit card too often

If you choose to pay off your credit card after every purchase, you’ll be screwing over your credit utilization rate, which makes up 30% of your credit score. In most cases, a lower utilization means a higher credit score—with 0% utilization being the exception.

The reason for this is that credit bureaus don’t receive information about your account until the end of the billing cycle. If you always pay off your balance before you can receive a statement, it looks to the bureaus like you’re not using the card at all. And with no credit history to scrutinize, you’re damaging your credit health.

The best credit card payoff strategy

Unless you’re seriously worried about racking up debt, it’s not wise to pay off every single credit card swipe immediately. But if you’re looking to improve your credit score, it pays to wait until your statement date to pay off your balance. The sweet spot is to have a balance that is less than 30% of your total credit, and to always pay on time to avoid interest or late fees.

Ultimately, the best strategy for you is whatever ensures you don’t fall into debt. It’s better to be paying too much than finding yourself unable to pay at all.

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